Coca-Cola HBC’s share price remains vastly cheaper than it was 12 months ago. In fact, it trades at a whopping 24% discount.

The descent reflects the impact of the war in Eastern Europe on its operations. It also underlines the threat that revenues could slump as consumer spending power sinks.

I’m thinking of using this weakness as an excuse to go dip buying however. Its current forward price-to-earnings (P/E) ratio of 14.5 times sits well below its historical average.

What’s more, latest financials from US-listed The Coca-Cola Company (NYSE: KO) have reinvigorated my appetite for the stock.

Fizzy results

Coca-Cola is one of billionaire Buffett’s favourite stocks. He’s held shares in the soft drinks giant since 1988. And today, it is the third-largest holding within his Berkshire Hathaway investment firm.

Brand power is an important quality that Buffett searches for when he chooses which stocks to buy. Coca-Cola’s update on Wednesday reveals how powerful this weapon is.

Organic revenues at the Coke, Sprite and Dr Pepper manufacturer leapt 16% in the three months to September, it said. Volumes ticked 4% higher year on year. And operating profit at constant exchange rates jumped 18% year on year.

Coca-Cola has been hiking prices in response to mounting costs. But thanks to the colossal popularity of its products, sales and volumes continue to rise. Demand remains rock-solid even as inflation sits at multi-decade highs.

In fact, Coca-Cola hiked its full-year forecasts on the back of its third-quarter performance.

A Buffett-like beauty

Coca-Cola HBC’s role as bottling partner of The Coca-Cola Company gives it the same benefits of brand power. But the similarities don’t end there.

Coca-Cola HBC also has considerable strength in depth. It bottles fizzy pop along with juice, water, tea, coffee and energy drinks. It also has exposure to increasingly popular categories (such as low-calorie drinks which it serves through its Coca-Cola Zero Sugar product).

This helps protect revenues from changing consumer tastes and allows it to exploit fast-growing categories.

Like its US partner, Cola-Cola HBC has a huge geographic footprint as well. This provides protection to earnings in case of localised problems. And it gives the FTSE 100 firm exposure to developing and emerging markets in Eastern Europe and Africa.

Mark the date

Coca-Cola HBC is due to release its own financial update on 8 November. I think earnings here could also beat expectations for the third quarter, resulting in impressive share price gains of its own.

The soft drinks market is a incredibly competitive one. And this presents a huge risk to the FTSE 100 company. But Coca-Cola HBC’s brilliant track record versus its rivals provides me with reassurance.

I believe recent price weakness makes this Buffett-like stock a great buy for long-term investors.

Profiting from a high oil price

Oil giant BP (LSE:BP) has seen its share price climb by over 14% in the past month. At the time of writing, the shares are trading at 446p.

For the three months to 30 June, the firm reported that underlying profit increased to $8.5bn from $2.8bn during the same period in 2021. In addition, revenue grew by 85% to $69.5bn.

Given these sparkling results, the business announced that it was paying a quarterly dividend of ¢6.006 per share. It’s also embarking on a brand new $3.5bn share buyback scheme, this is another indication that the company is in a strong financial state.

High oil prices essentially increase the value of BP’s produce. There’s risk, however, that this trend begins to fade as the market becomes better supplied with oil. This could lead to inferior future results for the business.

Regardless, BP’s net debt fell from $32.7bn to $22.8bn, year on year, while operating cash flow stands at $10.9bn.

With a total of £1,800 to spend on the shares in this stock per year, I may be able to purchase 400 shares in that time. With the current dividend payment at $0.22, this could give me $88, or £74. That’s equivalent to 4.1% of my initial investment and may be reinvested.

A global brand

Second, shares in Coca-Cola HBC (LSE:CCH) are up 24% in the last three months. For the six months to 1 July, the drinks manufacturer reported that revenue grew nearly 30% to €4.2bn.

Also, operating profit fell by 21.3% to €275.7m. What explains this decline? It was mostly caused by higher costs and the impact of inflation. Additionally, the company decided to suspend operations in Russia following the invasion of Ukraine.

Russia provided a not insignificant proportion of the firm’s sales, so this ceasing of operations naturally had a detrimental impact on revenue figures.

Despite this, investment bank Deutsche Bank upgraded the company, arguing that it still looked cheap. Indeed, it increased its price target from 2,525p to 2,600p.

My other £1,800 could buy me 86 shares in Coca-Cola HBC in a year. With a dividend payment of €0.71, this may equate to a payment of €61, or £51.

Added to the potential payment from BP, this could mean a total annual dividend payment of £125. I could use this to buy more shares in the future, thus gradually increasing my holdings in each stock.

Overall, these businesses could provide growth in the coming months and years. While both face different challenges, I’m quite confident that they can overcome these in the long term. With that in mind, I’m putting my money where my mouth is and investing £300 per month in these stocks.

War in Ukraine has caused massive operational issues in the region. It has also forced the business to withdraw from Russia, a core growth market. The firm had to take a €190m hit in the first half because of it.

More colossal charges could come down the line as the conflict drags on. But despite this threat I plan to continue holding my Coca-Cola HBC shares.

You see the business still has considerable exposure to exciting growth markets in Africa and across Central and Eastern Europe. And this could deliver tantalising investor returns in the decades ahead.

Brand power

Coca-Cola HBC has another formidable tool that makes it a great stock to buy. The products it bottles are some of the most popular fast-moving consumer goods on the planet.

This gives the FTSE 100 firm supreme earnings visibility, and the means, to maintain a broadly progressive dividend policy (more on this later).

Coca-Cola is the world’s most popular soft drinks brand, as the chart below from consultancy Brand Finance shows. In fact it’s worth more than twice as much as second-placed Pepsi.

And Coca-Cola HBC has more than just one superbrand in its locker. It can also rely on labels like Monster Energy, Fanta and Sprite to drive the bottom line.

Robust results

These drinks remain popular throughout the year and during all points of the economic cycle. Shoppers will stretch their budgets to buy them even when times get tough. I think they’ll go without other food and drink items to put them in their basket.

Furthermore, the immense brand power of Coke and the others means that prices can also be raised without demand collapsing.

Financials for the first half illustrate Coca-Cola HBC’s robustness. Even as the global cost-of-living crisis worsened and sales in Russia and Ukraine tanked, group organic revenues soared 19.4% year on year.

A passive income star

The company isn’t immune to bumps in the road. It saw earnings drop in 2020 as Covid-19 lockdowns smashed the hospitality sector. And it’s expected to see profits drop 13% this year too.

This means the business is expected to reduce the dividend too. A payout of 66 US cents per share is anticipated, down from 71 cents in 2021.

As an investor in the firm myself, I find this disappointing. However, my belief in Coca-Cola HBC as a great dividend stock remains undimmed. It’s certainly proved an effective share to boost my passive income in recent years.

Thanks to the qualities I describe above, the annual dividend payment here rose 109% between 2013 and 2021. And once the turbulence it’s experiencing in Russia and Eastern Europe abates, I expect the company’s progressive dividend policy to return. And so do City analysts who forecast a 73-cent dividend for 2023.

A strong FTSE 100 share

The company I like is Coca-Cola HBC (LSE:CCH). Over the past year, the share price is down 26%, but what impresses me is the company’s short-term performance. Over the past three months (when the broader market has struggled), the share price has jumped by 22%.

The reason why I think the stock could perform well even if the UK struggles is due to the diversified nature of the business. Sure, it does bottle a lot of Coca-Cola! But the firm also services third-party and even own-brand labels. This is across the soft drink and alcohol range. In this way, it has a broad reach of potential clients.

Exposure to Russia and operations in Ukraine have hampered share price performance earlier this year. I note that this is an ongoing risk. Yet it’s not big enough of a problem to put me off investing. For example, in 2021, Russia and Ukraine combined only amounted to around 20% of total volume.

Aside from fundamentals, I also note the 5.74% dividend yield currently on offer. This makes the stock of dual interest to me, partly for share price upside and also for income potential.

Too much of a gamble

The second share I’m staying away from is Entain (LSE:ENT). The global sports betting company has operations not just in the UK but also in Europe and the US. The share price is down 33% in the past year.

Unfortunately, I think that the UK market could suffer in the second half of the year due to the cost-of-living crisis. Having a punt on the horses or the football is something that I think many would cut back on when trying to tighten up spending habits.

Further, economic growth is slowing in the US, with data last week showing that it has entered a technical recession. Therefore, I think a reluctance to gamble is something that could impact all markets for Entain.

I also expect some negative impact to the business from the upcoming UK Gambling Act review. Any added restrictions relating to marketing or promotions to customers will act as a natural dampener on revenue going forward.

In the recent results from July, group net gaming revenue was up 18% for H1 versus the same period last year. This does show me that the business is resilient, even in the face of pressures. Further, with the men’s football World Cup later this year, there are plenty of opportunities to capitalise on revenue.

A household name

Coca-Cola HBC (LSE:CCH) has very solid earnings growth. Between 2017 and 2021, its earnings per share (EPS) rose from ¢117 to ¢150. By my calculation, this results in a compound annual EPS growth rate of just over 5%. This is strong and consistent for this business, which is the Coca-Cola operation in Europe.

What’s more, pre-tax profit has increased from €565m to €735m over the same time period. In addition, operating cash flow is around $1.14bn, while the debt pile was $2.94bn at the end of March.

The investment bank Jefferies recently upgraded its view on the shares from ‘hold’ to ‘buy’, increasing its target price from 1,800p to 2,000p. At the time of writing, the shares are trading at around 1,800p.

Despite this, the ongoing war in Ukraine has dented some of the company’s operations, because it essentially ceased trading in Russia. This is problematic for the firm, as sales in this area generated around 20% of profits. 

Given the unpredictable nature of the war, it’s not yet known how long this issue might impact the business.

Ready for take off

International Consolidated Airlines Group (LSE:IAG) was hit hard during the pandemic. This was chiefly caused by the grounding of flights across the world. I have owned shares in IAG since 2020. The shares themselves are down 43% in the past year and, in the last month they have fallen by 15%. At the time of writing, they are trading at 110p.

The company – an airline conglomerate that owns brands like British Airways and Aer Lingus – swung to a pre-tax loss of nearly €8bn in 2020. That year, the firm even had to issue new shares to raise funds and bolster the balance sheet. 

By 2021, however, this loss had almost halved as more flights began to take off. In a trading update for the first three months of 2022, the business stated that it expected passenger capacity to hit 85% of 2019 levels this year. 

This is a massive increase from the past two years and could be an indication that the airline industry is returning to some degree of normality. 

Despite this, the company still has some problems to overcome. Jet fuel prices are climbing following surging oil prices, while flight cancellations are becoming common due to staff shortages and strike action. 

Overall, both of these firms will have a place in my portfolio. I think that IAG’s issues are fundamentally short-term in nature and that the shares are trading at very low levels, whereas Coca-Cola HBC demonstrates strong growth and is a household name. I will be buying Coca-Cola HBC, while adding to my existing IAG position soon.  

J Sainsbury

Supermarkets like J Sainsbury (LSE: SBRY) could theoretically stand to gain as living costs soar. In this environment, people can be expected to eat at home more to save cash.

I won’t be buying Sainsbury’s shares during this bear market though. I’m worried about the business losing customers to the value chains in large numbers. In this scenario, profits could tank if revenues slump and it cuts prices to win back shoppers.

Latest Kantar Worldpanel data shows sales at Aldi and Lidl rose 7.9% and 9.5% respectively in the 12 weeks to 12 June. As a result, their market shares continued to rise while J Sainsbury’s slipped (down 0.3% year-on-year).

Therefore, I’m not tempted by its 6% forward dividend yield and price-to-earnings (P/E) ratio of around 10 times. The pressure of rising competition in the near-term and beyond make Sainsbury’s a risk too risky, I feel.

Coca-Cola HBC

On the other hand, I’d happily increase my holdings in Coca-Cola HBC (LSE: CCH). The soft drinks bottler has sunk in value in 2022, reflecting the impact the war is having in its Ukraine and Russia markets.

Yet I’m still considering upping my stake, despite the ongoing problem. This is because its current P/E ratio of around 16 times sits well below its historical average above 20-21 times. Recent price weakness now more than reflects the near-term trouble it faces.

I first bought Coca-Cola HBC shares because of the exceptional brand strength of the drinks it bottles. Labels such as Coke, Fanta and Sprite are staples of shopping baskets and this gives the company excellent long-term earnings visibility.

And I’m backing the business to get back delivering solid earnings growth once the current crisis subsides. It also has exceptional exposure to fast-growing emerging economies. Furthermore, it should also benefit from ongoing product development from The Coca-Cola Company in areas like low calorie beverages and fitness drinks.

Barclays

Barclays’ (LSE: BARC) North American operations helps take the sting out of the bleak UK economic outlook on the firm. It could also lead to robust long-term profits growth.

What’s more, Barclays offers excellent bang for my buck following recent share price falls. It trades on a forward P/E ratio of 5.5 times, while its dividend yield sits at 4.8%. The question is whether this sort of all-round value makes it worth taking a risk on.

It’s my opinion the dangers created by Britain’s flagging economy make Barclays an unattractive dip-buy today. Last week, the Financial Conduct Authority called on banks to provide better support for struggling customers and to “only charge them fees which are fair and that cover the firm’s costs”.

The pressure for banks to act in this way is likely to grow as the cost of living crisis worsens. It could persist for Barclays beyond 2022 too, resulting in a prolonged period of weak revenues and high loan impairments. So I’d rather spend my hard-earned cash on other stocks.

A defensive stock that’s taken a hit

As a quick disclaimer, no stock is completely recession-proof. If the UK goes into a recession, even a defensive stock could still fall in value. The reason why I’d still buy the specific stock is because it should outperform many other stocks in the index.

The first example that I like is Coca-Cola HBC (LSE:HBC). The share price has fallen by 33% over the past year. From that angle, some might wonder why I’m considering this stock as protection against a recession?

The main reason for the fall is due to the invasion of Ukraine. Most of the tumble came in February when Russian forces entered Ukraine. Coca-Cola HBC had to stop production at the facility in Kyiv, with operations being hampered throughout the region.

However, when I consider the company against a backdrop of a recession, I still think it makes sense to invest. The core product is a consumer staple. Even other third-party bottling requests that it services relate to coffee, juice and some alcoholic beverages. Regardless of the state of the economy, I feel that consumers will still buy these goods.

In fact, when I consider the valuation, I think I might buy the stock now and not wait! The fall has reduced the price-to-earnings ratio down to just under 14, making it a much more appealing play than it was at the start of this year.

A recession stock from the utility sector

The second stock that I think could hold ground well in a recession is Severn Trent (LSE:SVT). The water stock doesn’t just have operations in the UK, but also some diversification from the US and Europe. Over the past year, the share price is up 13%.

My focus is on the UK business. As a utility provider, I don’t feel that the households and businesses it supplies to will cut off water in a recession. It could see lower demand as consumers reduce water usage to try and save money. Yet we all need water for a variety of uses, and this won’t stop during whatever stage of the economic cycle we’re in!

The full-year results for 2021 also impressed me. Group turnover increased 6.4% year-on-year, with profit before interest and tax also up 7.5%. This enabled the dividend per share to tick slightly higher, meaning that the current dividend yield is 3.57%.

This recession stock isn’t perfect, though. There have been some issues recently regarding concerns about the sewage and cleanliness of some plants. The company has to be careful to sort this out to prevent reputational damage that could impact the share price.

I’m putting Severn Trent on my watch list for the moment. If the UK does head towards a recession, I’ll be investing.

UK shares: Coca-Cola

Providing that ice-cool hit on a warm day, Coca-Cola is a recognisable drinks brand in every corner of the globe. Listed on the FTSE 100, Coca-Cola HBC (LSE:CCH) is a bottler operating mainly in Europe and Africa. It currently trades at 1,671p, down 26% in the past year.

I see strong growth in its historical results. Between the 2017 and 2021 calendar years, group revenue increased from €6.5bn to €7.1bn, while profit before tax grew from €564m to €734m. As a potential shareholder, I see this growth in both revenue and profit as strong and consistent.

What’s more, earnings per share (EPS) rose from ¢117 to ¢150. By my calculation, this means that this firm has a compound annual EPS growth rate of just over 5%. In addition, the 2021 calendar year operating expenses declined by 1.9%, year on year.

On the other hand, the business recently pulled its guidance for 2022, because of the ongoing situation in Ukraine. It has a production plant in Kyiv and its sales in Russia will likely be affected. While this is a short-term concern, I think it is now factored into the share price and should subside in the near future.  

Veterinary pharmaceuticals

Another great UK share is Dechra Pharmaceuticals (LSE:DPH), which specialises in veterinary pharmaceuticals and biotechnology. Operating globally, it has strong historical results like Coca-Cola HBC. It currently trades at 4,109p, up 21% in the past year.

For the years ending June, between 2017 and 2021, revenue nearly doubled to £608m. Also, profits before tax rose from £28.6m to £74m. 

In addition, EPS grew from 64.68p to 108.77p, resulting in a compound annual EPS growth rate of nearly 11%. As a potential investor, I’m happy to see this level of sustained growth. It should be noted that past performance is not necessarily indicative of future performance.

The company has stated, however, that it faces strong competition on a number of new products within the EU market.

For the six months to 31 December 2021, the firm lifted its interim dividend to 12p per share, up over 8% year on year. This caused investment bank Liberum to raise its price target from 4,000p to 4,020p.

Overall, both of these UK shares exhibit strong growth over time. Given the recent market sell-off, I think they’re both good additions to my long-term portfolio. I will be buying shares in both companies today.

Why the CCH share price has fallen

Just because it has Coca-Cola in the name, I shouldn’t get confused about the business as a whole. It’s true that NYSE-listed Coca-Cola Co does own over 20% of the shares in CCH. It’s also true that the company is the third largest bottler of Coca-Cola in the world. But it does also support own brands and other third party beverage companies.

However, the impact of Coca-Cola itself is one reason for the falling CCH share price recently. The company has suspended its operations in Russia, having a direct impact on the bottling and selling requirements for CCH. 

Not only this, but CCH actually has a plant located in Ukraine, which it has recently had to shut down. This too will impact supply in the short term. 

Finally, CCH services most of Europe. Even though Ukraine and Russia accounted for around 20% of 2021 volumes, if the impact of the war moves more into Central Europe then business could be hurt even further.

Why I think the shares are undervalued

I do understand why CCH shares have fallen in the past few weeks. But I ask myself whether a 36% fall is really representative of the facts I’ve just detailed above. There will be a negative financial impact on the business in this fiscal year, but I struggle to see it being substantial enough to warrant such a move downwards.

In the full-year results released in February, the company showed total volumes up 13% from 2020. Net sales revenue was also up 16.9%, helping to boost net profit by 31.9% on the previous year. It’s clear that the business has been doing well overall, and I don’t think the negative impact from Eastern Europe will be enough to materially alter this given the extent of the volume from this area.

In fact, one of the reasons why I like the company is the broad geographical mix of countries that it deals with. This spans three continents, from Nigeria to Italy. This should insulate it from negative issues seen in a few of these at any one time. 

I could be wrong here, as noted from the price-to-earnings ratio. Even with the steep fall recently in the CCH share price, the ratio is still 15.72. This is around the FTSE 100 average. So it could be the case that rather than currently being undervalued, the share price used to be overvalued, and the fall has merely brought it back to par.

It’s clearly a high-risk play to consider buying shares in any company with exposure to Eastern Europe at the moment. However, I think that the market has got carried away with the CCH share price. The nature of the goods sold and the diversified geographical selling area leads me to want to buy CCH shares now.

The events of the past couple of years have shown that even solid consumer staples businesses like this aren’t immune to weakness . First the pandemic took a bite out of Coca-Cola HBC’s earnings as out-of-home sales slumped during lockdowns. And now the unfolding tragedy in Ukraine threatens to derail CCH’s post-pandemic recovery.

Still falling

Coca-Cola HBC’s share price has suffered more heavy losses in Wednesday business as shelling in Ukraine has intensified. It’s down 6.2% today at £16.62 and trading around its cheapest for almost two years. On a 12-month basis the stock’s fallen 28% so now it’s trading on a forward price-to-earnings (P/E) ratio of 11.9 times.

Historically CCH’s share price has commanded a much-meatier forward P/E ratio of around 20 times. The risks to the FTSE 100 firm are increasing, sure. And as a human being my concerns over CCH take a back seat to my horror at the worsening conflict. But as a long-term investor, should I consider increasing my holdings given that slumping earnings ratio?

Why exactly has CCH’s share price tanked?

Coca-Cola HBC is considered to have significant growth opportunities because of its broad exposure to emerging markets. The problem right now is that the conflict in Eastern Europe could decimate the recovery in two of its biggest emerging markets.

Collectively Russia and Ukraine account for 16% of all volumes. What’s more, the post-pandemic rebound has been particularly strong in these two nations. Russian volumes rose 18% in 2021 while those in Ukraine jumped 17%. By comparison volume growth across the group averaged 13% last year.

It’s no shock then that investors have headed for the exits in recent days. The impact of economic sanctions on consumer spending in Russia — a country accounting for more than a quarter of all emerging market volumes — threatens to significantly harm CCH’s earnings. The business has also shuttered its Ukrainian bottling plant in recent days.

Here’s what I’m doing today

Last week Coca-Cola HBC chief executive Zoran Bogdanovic tried to soothe investor fears over its Eastern European operations. He told Reuters that “we have contingencies in place for all scenarios” and that the firm has built stockpiles to help it avoid disruption.

Only time will tell if the company has done enough in response to the crisis. But right now things are looking dicey for Coca-Cola HBC and its share price in the short-to-medium term. The question is whether I, as someone who invests for the long haul, should think about buying CCH following its recent share price dip.

I still believe that Coca-Cola HBC has the tools to grow strongly in the future. The brand power of its beverages is unrivalled, while its entry into fast-growing segments like low-calorie and energy drinks is progressing nicely. But right now I’ll hold off buying the FTSE 100 stock until the tragedy in Eastern Europe eases and its future in Russia and Ukraine becomes clearer.